German firms in China hit hard by US tariffs, but ‘in China for China’ paying off: poll

The tit-for-tat tariff war between the United States and China has induced a notable decline in the economic outlook perceived by German firms in China, but their investment plans in the country remain largely unimpeded, according to a business advocacy group.

A recent business survey by the German Chamber of Commerce in China indicates that its members have claimed to be most affected by Washington’s tariffs on goods from the country, followed by Beijing’s retaliatory tariffs on American goods.

But the impact is more indirect, transmitted through the adverse effects of the soaring tariffs on China’s economy, rather than directly harming their operations, given their limited exposure to direct trade with the US, according to Oliver Oehms, executive director and board member of the German Chamber of Commerce in northern China.

“Most of our member companies have been ‘in China for China’ for a series of years,” Oehms said, referring to a strategy that many foreign firms adopted regarding their investment and production in the world’s second-largest economy, by serving Chinese consumers rather than international ones.

“The very deep localisation means they are kind of isolating their operations in China from US exposure, and that’s the good news,” Oehms said. “The ‘in China for China’ strategy is paying off, in this case.”

Since US President Donald Trump’s return to the White House this year, Washington has imposed tariffs totalling 145 per cent on most Chinese imports, bringing the effective tariff rate to about 156 per cent. Meanwhile, Beijing’s new levies on US goods entering China have risen to 125 per cent, also on top of earlier-imposed tariffs.